The value of patent opinions after the America Invents Act (Part 2)

In Part 1 of this article, we discussed the background of section 298 of the America Invents Act (AIA) and noted that this section of the AIA only applies to patents issued on or after Sept. 16, 2012. With respect to induced infringement, most patents asserted today issued prior to Sept. 16, 2012, and therefore the court is required to follow the 2008 Broadcom decision of the Court of Appeals for the Federal Circuit rather than Section 298. With respect to charges of willfulness, Section 298 of the AIA only affects the determination of willfulness and not, should willfulness be found, whether enhanced damages should be awarded.

The Federal Circuit, discussing willfulness in its 2011 Spectralytics decision, stated that the district court applied Seagate “in a more rigorous manner than is appropriate” when it excluded evidence that defendants failed to seek an opinion of counsel or that defendants sought an opinion of counsel but did not disclose it. The Federal Circuit held that, while Seagate removed the presumption of willful infringement flowing from an infringer’s failure to exercise due care to avoid infringement, Seagate did not change those considerations relevant to enhanced damages once willful infringement has been found. Thus, after willful infringement is established, it is not improper to consider the infringer’s failure to obtain an opinion of counsel in an enhanced damages determination.

In its 1992 Read decision, the Federal Circuit identified nine factors that may be relevant to the determination of whether damages should be enhanced. With respect to the second Read factor, investigating the scope of the patent to form a good-faith belief that it was invalid or that it was not infringed, an opinion of counsel should be both relevant and admissible as to the state of mind of the accused infringer. Further, at least one district court stated that the second Read factor is “the single most important factor” in determining enhanced damages.

If an accused infringer is found to be willful, a competent and timely opinion of counsel is significant evidence for the court to consider in deciding whether to enhance damages. At the very least, not having an opinion of counsel will make things much worse. Using the second Read factor as a guide, the presence of a competent and timely opinion of counsel generally weighs against a significant enhancement of damages, while the absence of such an opinion may weigh in favor of a significant enhancement. In view of the foregoing, whether pre- or post-AIA, a competent and timely opinion of counsel is relevant to a determination by the court as to whether enhanced damages should be awarded after willfulness has been found.

An opinion of counsel also remains strong evidence in the initial willfulness determination. With respect to the first prong that “the alleged infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent,” the Federal Circuit has held that an opinion of counsel concluding either non-infringement or invalidity “would provide a sufficient basis for [a potential infringer] to proceed without engaging in objectively reckless behavior.…” Indeed, the Federal Circuit has described opinions of counsel as serving “to provide an objective assessment for making informed business decisions.…” With respect to the second prong, that “this objectively high risk was either known or so obvious that it should have been known to [the alleged infringer],” good-faith reliance on a competent and timely opinion of counsel should be sufficient to negate intent. Thus, while Seagate may have removed the obligation to procure an opinion, it did not negate the benefit that an opinion provides as a safe harbor in an initial willfulness determination.

Lastly, having a competent and timely opinion of counsel can significantly alter the atmospherics at trial. To win at trial, it is never enough merely to refute the patentee’s allegations. A good trial lawyer knows that a patent jury trial is a morality play — right versus wrong, fair versus unfair, another episode in the struggle between good and evil. As a result, the patent owner will characterize the defendant at trial as being a scurrilous infringer. The defendant, on the other hand, will try to show that he is merely the innocent victim of an unscrupulous and overreaching patentee. In this contest, juries struggle to figure out who is the hero and who is the villain.

Quite early in a trial, juries typically decide which party they believe is the “good guy” and which is the “bad guy.” All evidence presented thereafter is considered, evaluated and accepted or rejected in the context of this decision. Thus, it is critically important that an accused infringer affirmatively demonstrate that it is a good corporate citizen and has a policy of acting in a socially responsible manner. In this regard, Seagate, and subsequent case law, actually enhanced the value of patent opinions when it abolished the affirmative obligation to obtain the advice of counsel. Now, those who seek and obtain the advice of counsel, when they are under no obligation to do so, have persuasive evidence that they have acted with abundance of caution and in good faith. While a jury may not understand the finer points of patent law, it is comfortable with the concepts of lying, stealing and taking unfair advantage. It is on this basis that that a jury will ultimately render its verdict.

Even after implementation of AIA, competent and timely opinions of counsel continue to play an important role in patent infringement litigation. They are powerful evidence on both prongs of the willfulness inquiry and are directly relevant to enhanced damages. For pre-2012 patents, an opinion of counsel may also be sufficient to avoid a finding of inducement. Finally, an opinion of counsel can have a dramatic and favorable effect on the atmospherics of a patent jury trial winning the jury over to the position of the accused infringer.